For nearly a year, a battle has been raging between banks and retailers. It appears that banks have lost, and on July 21, 2011, a 12-cent cap on debit swipe fees will be implemented. Last year, Congress passed a law that included, among other things, a cap to debit card swipe fees. These are the fees, averaging 44 cents a swipe, that retailers pay when you use your debit card. Retailers, of course, would like to save the money (whether or not they’ll pass the savings to you the customer is a completely different question). Banks, on the other hand, stand to lose billions in revenue. As you might imagine, they’re not happy about this development — and many are figuring out how to replace all that lost revenue.

For consumers, this is likely to mean more fees.

Update: At the eleventh hour, the Fed has provided a sop to the banking industry. The swipe fee limit has been lifted to a base fee limit of 21 cents, with the ability to tack on 0.05 percent to cover the costs of fraudulent charges. And, the new fees will now be in effect on October 1, 2011, rather than July 21. You can read more from the Federal Reserve.

Here Come the Bank Fees

Indeed, some of the major banks are already field-testing higher fees in different areas. Chase tested out $5 ATM fees in at least one state. Bank of America has been rolling out a tiered checking account system with fees at different levels. My own primary bank (Key) is instituting activity requirements. If I don’t engage in a certain number of transactions using my bank account each month, and if I don’t have a minimum balance to offset my lack of activity, I could be charged a fee.

Now is the time to be on the look out for correspondence from your bank. Watch for notices that the following fees might be added to your account:

Monthly service fees.

Statement fees (especially if you are getting paper statements).

Fees for using the teller more than a few times a month (especially if you have an “express” account).

I’m sure that I’ve missed a few, as well. In any case, it is quite likely that fees are coming. And online banks may not be exempt. We’ve grown used to online banks as being a refuge from fees. However, with the recent purchase of ING Direct by Capital One, many are wondering what could be next — and whether these big banks will let online banks operate as they have in the past.

Will Your Debit Card Purchases Be Limited?

Another option that some banks are reportedly considering placing a limit on debit card transactions. JPMorgan Chase is considering placing a limit on debit card transactions, amounting to $100 — or even only $50. This means that if you had a larger purchase, you would have to use a credit card (if you didn’t use cash). With the credit card use, transaction fees wouldn’t be limited to 12 cents. Indeed, many transaction fees with credit cards are charged as a percentage of the transaction amount. Forcing you to use a credit card on larger purchases would help banks get around the debit swipe fee cap.

No matter how you slice it, changes are likely coming. Your best bet is to pay attention to the changes happening, and be prepared to move your money to another bank if necessary.

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The fee is actually capped at 21 cents per transaction, plus one penny, plus 0.05% (for fraud protection), leading to an average fee (on a $38 transaction) of almost 24 cents (still down from the current average of 44 cents, but not nearly as bad as 12 cents).

Visa and Mastercard stock shot up on the news. Apparently American Express’ network is exempt from the rules.

It looks like this cap may help retailers, but it will probably hurt a lot more consumers by the increased fees. Plus, the bigger banks will find ways to adapt (as they usually do), but the smaller banks/credit unions will probably fail or be sold for pennies on the dollar. The banking system in the US is still pretty fragile as it is, given the events of the past few years…

Regardless of the nature of attempts to rein in the financial beast that has consumed America since the 19th century, the end result seems to always fall on the shoulders of the consuming public. I’d like to see true free market principles applied to these wizards so they can fail like the rest of us when their exotic ploys fail. Hold on, I think my tin-foil helmet needs recalibration.

Merchants wanted the fees capped at 12 cents; banks liked things the way they were. This compromise will let the banks claim they are not making enough money and have to charge us other fees, and allow the merchants to say that the savings are too small to pass on to consumers. Nicely done! Screwed at both ends.

No matter what the Govt does, people/ business will ALWAYS outsmart the government. This is a time-tested true universal statement. You can check any government any time. The laws will always have loopholes and people will find it to use in their favor.

I really love how much I am charged for banks to use my money yet when I want to use it there is somehow a large fee attached. It is a pain to change banks etc… and they know it as so much is electronic and automated i.e. bill pay etc..

You can absolutely be assured that changes are coming. Since the debit card fee lost will probably be around $10-15 million for banks at the low end of assets ($12 billion), expect several free items your bank does to come with a fee, and those that already do to have a higher fee. Like it or not, that was easy money for them to get, but it’s going to be difficult for the banks affected to let it go.

I do not have a huge problem with these type fees or reduced perks (if you will).

Banks were really the ones that got us in the sub-prime mess, and they got their hands slapped. Its a lot harder to get mortgages so they have to look for revenue else where. It’s part of life. If you do not like it, pay cash.

I disagree. The mortgage brokers/bankers got us into subprime mess by offering low-doc/no-doc lpans. Pretty nice if you can sell off a bad mortgage to investors. Your community and most of your larger banks took little part in this, especially if they held the loan. But then again, your name is houseflipguy, so I figure you probably don’t like the additional restrictions that are now in place

Just to note, according to the lobbying group for retailers, stores will pass the savings onto the consumer. I personally disagree and find this to be an attempt to manipulate the market(by reducing the fees charged to merchants, profits look better.) This should be repealed. It will simply hurt the consumer!!

This is craziness! People are already struggling with higher taxes, higher cost of fuel, high food costs, no increase in pay to offset the increase and now the banks want to take even more money. Why don’t we just hand our pay checks over to the government each payday and live on the streets. I had no idea I had birth a govie child. Don’t they usually lock people up for stealing?

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